Iti Holdings And Investment ... vs M/S Siemens Financial Services ...
2021 Latest Caselaw 9787 Bom

                                                                 9-IA(L)-12084-21.doc




                          IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                 ORDINARY ORIGINAL CIVIL JURISDICTION
         Digitally
         signed by                    IN ITS COMMERCIAL DIVISION
         GANESH
GANESH   SUBHASH
         LOKHANDE
SUBHASH
LOKHANDE Date:                   INTERIM APPLICATION (L) NO. 12084 OF 2021
         2021.07.27
         14:27:14                                 IN
         +0530
                                   COMPANY PETITION NO. 761 OF 2015
                                                WITH
                                INTERIM APPLICATION (L) NO. 9825 OF 2021
                                                  IN
                                   COMPANY PETITION NO. 761 OF 2015

              ITI Holdings and Investment Limited                     .. Applicant


              IN THE MATTER BETWEEN:
              M/s. Siemens Financial Services Pvt. Ltd.               .. Petitioner
                          Vs.
              The Official Liquidator,
              of M/s. Valecha Engineering Limited
              and YES BANK Limited                                            .. Respondents
                                                -------
              Mr. Simil Purohit a/w. Nishit Dhruva, Prakash Shinde a/w. Niyati
              Merchant i/b. MDP & Partners, Advocates for the Applicant.
              Ms Nidhi Singh a/w. Zoheb Khatri, Advocates for the Respondent
              No.1.
              Mr. Cyrus Ardeshir a/w. Vaibhav Sharma i/b. Sukanya Bhaumik,
              Advocates for the Respondent No.2.
              Mr. Shanay Shah a/w. Mahendhar Aithe, Company Prosecutor for
              the Official Liquidator.




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                                              9-IA(L)-12084-21.doc


                            CORAM :- B. P. COLABAWALLA, J.

DATE :- 27th JULY, 2021.

(THROUGH VIDEO CONFERENCE)

P. C.:

1. Interim Application Lodg No.12084 of 2021 is filed

under Section 536(2) of the Companies Act, 1956 seeking

validation of a transaction of sale of immovable property being

Unit No.S-5, 2nd Floor, Valecha Chambers, alongwith seven car

parking Nos. 1, 2, 3, 28, 29, 30 and 31; New Link Road, Andheri

(W), Mumbai 400 053 (for short "the said property"). The said

property belonged to M/s. Valecha Engineering Limited (for short

"VEL") and was mortgaged to YES BANK Ltd. (Respondent No.2)

to secure certain facilities granted by the said Bank to VEL. The

said property was purchased by the Applicant vide a registered

Sale Deed dated 16th January, 2018 executed between the

Applicant and VEL. By order dated 1 st March, 2018 passed by this

Court, VEL has been ordered to be wound up and the Official

Liquidator is also appointed to take over the assets of VEL. The

reason why the Applicant is constrained to file the present

application is because the Official Liquidator (of VEL) visited and

sealed the said property by affixing a notice thereon dated 11 th

March, 2021 and taking physical possession of the same on the

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grounds stating therein.

2. Adverting to the facts, Mr. Purohit, the learned

advocate appearing on behalf of the Applicant, submitted that the

said property is divided into three units which were given on

Leave and License to three different companies viz. (1) Max Life

Insurance Company Limited; (2) AGIV India Private Limited; and

(3) Eccella Consulting. As far as AGIV India Pvt. Ltd and Eccella

Consulting are concerned, the Leave and License Agreements

have come to an end. They have handed over quiet and peaceful

possession of their respective units. As far as Max Life Insurance

Company Ltd. is concerned, it is stated that they are still in

occupation of their respective unit as a licensee.

3. Mr. Purohit submitted that when the Applicant learnt

of the sealing of the said property by the Official Liquidator, the

Applicant made enquiries and was made aware of the order passed

by this Court on 1st March, 2018 in Company Petition No. 761 of

2015 under which this Court ordered VEL to be wound up and

appointed the Official Liquidator as the Liquidator of VEL with all

powers under the provisions of the Companies Act, 1956. It is only

then that the Applicant came to know that VEL was in liquidation.

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Mr. Purohit submitted that the Applicant is a bonafide purchaser

of the said property for consideration without notice and therefore

has approached this Court to direct the Liquidator to give back

physical possession of the said property to the Applicant and to

validate the sale transaction between the Applicant and VEL

which was entered into prior to the passing of the winding up

order dated 1st March, 2018.

4. To substantiate the Applicant's claim, Mr. Purohit took

me through the Interim Application and more particularly

paragraphs 8 to 16 thereof to show how the Applicant has

acquired title to the said property and that they are bonafide

purchasers of the same. He submitted that the said property was

admittedly mortgaged in favour of YES BANK much prior to even

the above Company Petition being presented before this Court. He

submitted that somewhere in the month of November, 2017, the

Applicant approached YES BANK and VEL with an offer to

purchase the said property. Thereafter, pursuant to certain

negotiations and representations, the Applicant released a sum of

Rs.12,37,50,000/- directly to YES BANK for the purchase of the

said property. The details of the payments made directly to YES

BANK are as follows:

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         (a)      A sum of Rs. 2,00,00,000/- (Rupees Two Crores only)

vide Pay Order No. 870999 dated 28 th December, 2017; and

(b) A sum of Rs.10,37,50,000/- (Rupees Ten Crores Thirty Seven Lakhs Fifty Thousand only) vide Pay Order No. 124266 dated 29th December, 2017 [after deduction of TDS].

5. Mr. Purohit also brought to my attention that over and

above the aforesaid payments made to YES BANK, a sum of

Rs.74,40,000/- (Rupees Seventy Four Lakhs and Forty Thousand

only) was also adjusted towards the sale consideration by way of

deposit held on behalf of the various licensees mentioned earlier.

Hence, the total consideration for the purchase of the said

property was Rs.13,25,15,150/- (Rupees Thirteen Crores Twenty

Five Lakhs Fifteen Thousand One Hundred and Fifty only), was

the submission of Mr. Purohit.

6. Mr. Purohit also brought to my attention that for the

aforesaid sale transaction, the Applicant has even paid a sum of

Rs.82,18,200/- (Rupees Eighty Two Lakhs Eighteen Thousand and

Two Hundred only) towards stamp duty and YES BANK has also

issued a Letter dated 15th January, 2018 giving their No Objection

to VEL to sell the said property on the terms and conditions

Ganesh Lokhande 5/17 9-IA(L)-12084-21.doc

mentioned in the said letter. Mr. Purohit also pointed out that YES

BANK has also executed a Deed of Release which records that in

consideration of the Applicant having paid the entire sale

consideration for the said property, the receipt of which is

acknowledged by YES BANK, it releases its mortgage on the said

property. Mr. Purohit submitted that pursuant to all this, and once

the entire sale consideration was paid, a Sale Deed dated 16 th

January, 2018 was executed between the Applicant and VEL and

which has been duly registered.

7. It was the submission of Mr. Purohit that the said

property has been purchased at a fair market value and is not

under valued. He submitted that it is no ones case that the sale

transaction in question is in any way fraudulent or that the said

property has been disposed of at a throw away price. He submitted

that the entire sale consideration is to paid to YES BANK who had

an exclusive charge over the said property and it is therefore clear

from the facts that not only is the present transaction a bonafide

one, but it is also in the interest of the Company in Liquidation

(VEL). Consequently, he submitted that this Court declare that the

aforesaid sale transaction in relation to the said property is valid,

Ganesh Lokhande 6/17 9-IA(L)-12084-21.doc

subsisting and binding on all concerned and possession of the said

property be handed over to the Applicant.

8. Mr. Ardeshir, the learned advocate appearing on

behalf of the YES BANK (Respondent No.2) supported the

submissions made by Mr. Purohit. Mr. Ardeshir submitted that

undisputedly YES BANK is a secured creditor of VEL and had an

exclusive charge on the said property for securing various

facilities granted to VEL. He too submitted that the sale of the said

property by VEL to the Applicant ought to be validated as the

same has been entered into with a bonafide intention and is also

beneficial to the interest of the Company in Liquidation. He

submitted that in any event, YES BANK, being a secured creditor

of VEL, has every right to stand outside winding up and realize its

security. By allowing the aforesaid transaction, YES BANK acted

in good faith and made best efforts to recover their outstanding

amounts which are nothing but public monies. Mr. Ardeshir

pointed out that even after receiving the sale consideration of the

said property from the Applicant (for and on behalf of VEL) there

are still huge outstanding dues payable by VEL (now in

liquidation). He submitted that as on 21 st March, 2021 VEL owes

YES BANK an amount of Rs.145 Crores whereas 'Valecha

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Infrastructure Limited' ("VIL") and for which VEL stood as a

corporate guarantor, owes Rs.114 Crores to the Bank. He

submitted that considering that YES BANK had an exclusive

charge on the said property, it had every right to issue the N.O.C.

and appropriate the proceeds of the sale towards satisfaction of

the outstanding dues of VEL as well as VIL. Mr. Ardeshir also

pointed out that it is undisputed that the Applicant is an

independent entity and neither the Applicant nor its Shareholders

or its Directors are in any manner connected with the Company in

Liquidation (VEL). In other words, it was his submission that this

is an arms-length transaction which has been entered into for the

purposes of repaying the secured creditor, namely, YES BANK. In

these circumstances, he too submitted that the prayers sought for

by the Applicant be granted by this Court.

9. On the other hand, Mr.Shah, the learned advocate

appearing on behalf of the Official Liquidator, submitted that on

21st April, 2015 the above Company Petition (Company Petition

No. 761 of 2015) was filed for winding up of VEL. Thereafter, this

Company Petition was admitted by this Court vide its order dated

7th April, 2017 and the said order also directed its advertisement

in the newspapers. The admission of the above Company Petition

Ganesh Lokhande 8/17 9-IA(L)-12084-21.doc

was accordingly advertised in the Free Press Journal and

Navashakti on 8th January, 2018 and also in the Government of

Maharashtra Gazette for the period of 1-7th February, 2018.

Subsequently, by order dated 1st March, 2018, VEL was ordered to

be wound up. Being aggrieved by the order of winding up, VEL

preferred an Appeal before a Division Bench of this Court. By

order dated 6th April, 2018, the Official Liquidator was directed

not to take any further steps in the matter. Mr. Shah submitted

this order of the Division Bench did not mean that the

appointment of the Official Liquidator was stayed or that the

Company was not wound up. Be that as it may, eventually, the

Division Bench by its orders dated 5 th March, 2021 and 9th March,

2021 dismissed the Appeal and upheld the order of winding up

VEL.

10. Adverting to these facts, Mr. Shah submitted that the

sale transaction between VEL and the Applicant is void by

operation in law and cannot be validated for the reasons more

particularly set out in paragraphs 12 to 17 of the Affidavit-in-

Reply filed on behalf of the Official Liquidator. He submitted that

the above Company Petition (Company Petition No.761 of 2015)

was filed against VEL on 21st April, 2015. This Petition was

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admitted on 7th April, 2017 and it was finally wound up by order

dated 1st March, 2018. Looking at the aforesaid sequence of

events, Mr. Shah submitted that the aforesaid sale, having been

executed after the commencing of the winding up proceedings i.e.

after 21st April 2015, is void. In this regard, he placed reliance on

Section 536(2) read with Section 441 of the Companies Act, 1956.

Mr. Shah submitted that the Application filed by the Applicant is

bereft of any proof or pleading that the purported sale was in the

beneficial interest of the creditors of the Company or in the

ordinary course of business. This being the case, the sale could not

be validated, was the submission. In support of this proposition,

Mr. Shah relied upon the several judgments of this Court, a list

whereof is as under:

Sr. No. Particulars

1. 2012 SCC Online Bom 1294 : (2012) 5 Bom CR 631: (2012) 6 AIR Bom R 847 : (213) 176 Comp Cas 53 Board of Industrial & Financial Reconstruction M/s. Jaipur Golden Transport Co. Ltd. .. Petitioner V/s.

M/s. Hindustan Transmission Products Ltd. .. Respondents

2. Official Liquidator's Report 139/2018 in the matter of M/s. GOL Offshore Ltd. And Company Petition 756/2014 & Company Petition 119/2015 Export Import Bank of India & Punjab National Bank .. Petitioner

3. 2013(2) Mh.L.J. 777 Sunita Vasudeo Warke .. Appellant V/s.

Official Liquidator & Others .. Respondents

4. 2017 SCC Online Bom 665 : (2017) 202 Comp Cas 551

Ganesh Lokhande 10/17 9-IA(L)-12084-21.doc

In the matter of Modi Stone Ltd. (in Liqn) Board of Industrial and Financial Reconstruction .. Petitioner

11. Mr. Shah submitted that the propositions laid down in

all the aforesaid judgments is that the Applicant must plead and

prove not only that the transfer is bonafide but also that it is in the

interest of the Company. To put it in a nutshell, Mr. Shah

submitted that in respect of transactions which are not in the

ordinary course of trade, the Court must consider all the

surrounding in circumstances and if from all those circumstances

it comes to the conclusion that the transaction should not be

treated as void, it is within the power of the Court under Section

536 (2) to validate the same. This, of course, is after the Court

comes to the conclusion and is satisfied that the sale transaction

was for the benefit of and in the interest of the company or for

keeping the company going or keeping things going generally. It is

only in such circumstances, that the Court should exercise its

discretion and thereafter consider validating the sale. He

submitted that in the facts of the present case, the Applicant has

failed to satisfy these tests and therefore this Court ought to reject

the Interim Application in toto.

12. Mr. Shah then submitted that by allowing the above

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sale transaction, the Court would effectively allow YES BANK to

steal a march over the other creditors of VEL. He submitted that

as on date, the Official Liquidator has received claims aggregating

to Rs.966 Crores and hence YES BANK, being only one of the

secured creditors, cannot steal a march over the rights of the

other creditors which also includes workmen and other secured

creditors. He submitted that similarly the Applicant cannot claim

any rights in the said property since the rights of the workmen are

to be secured under Section 529A of the Companies Act, 1956. For

all these reasons, Mr. Shah submitted that above the Interim

Applications be dismissed with costs.

13. I have carefully gone through the Interim Applications

as well as the Affidavit-in-Reply of the Official Liquidator and the

reply filed by YES BANK. It is not in dispute that YES BANK had

sanctioned certain credit facilities to VEL aggregating to

approximately Rs.75 Crores in the form of a Term Loan. YES

BANK has also advanced credit facilities to one of the Group

Companies of VEL, namely VIL, wherein VEL stood as a corporate

guarantor. The details of the facilities granted to VEL as well as

VIL have been set out in the Affidavit-in-Reply filed by YES BANK.

In the said affidavit, it also stated (and which is not disputed by

Ganesh Lokhande 12/17 9-IA(L)-12084-21.doc

the Official Liquidator) that the aforesaid facilities were inter-alia

secured by way of a registered Mortgage Deed dated 21 st January,

2015. It is pertinent to note that the mortgage was created prior

to the presentation of the 1st winding up Petition against VEL

which was on 21st April, 2015. In fact, the creation of the

mortgage in favour of YES BANK is not at all challenged by the

Official Liquidator. From the facts narrated earlier, what emerges

is that prior to the passing of the winding up order (i.e. 1 st March,

2018) the Applicant purchased the said property from VEL under

a registered Sale Deed dated 16th January, 2018 by paying a sum

of Rs.12,37,50,000/- (after deduction of TDS) to YES BANK. YES

BANK Ltd has in fact issued its No Objection for the aforesaid sale

as more particularly recorded in their letter dated 15 th January,

2018. Over and above this, YES BANK has also executed a Deed of

Release dated 16th January, 2018 releasing the mortgage on the

said property. All this was done after YES BANK received the sale

consideration for the said property. It is only thereafter that the

Sale Deed dated 16th January, 2018 was entered into and on

which stamp duty of approximately Rs.82 Lakhs is paid and the

said Sale Deed is also registered. In these peculiar facts, I do not

think that the Mr. Shah is correct in his submission when he

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states that the transaction in question is not a bonafide one. It is

nobody's case with the said property is sold at an under-value or

at a throw away price or that the same is fraudulent in any

manner. The only argument canvassed by the Liquidator was that

since the sale transaction was entered into after the presentation

of the winding up Petition, it is void unless the Court otherwise

directs. Merely because the transaction has been entered into

after the presentation of the Petition but before the winding up

order was passed, would not necessarily make it a transaction

which is void. The use of the word 'void' in section 536(2) is not, in

law, regarded as void ab-initio or a nullity in all situations. This is

because section 536(2) confers an enabling power on the Court to

direct that a disposition of property of a Company shall not be

void, though it was effected after the commencement of winding

up proceedings. Whether a particular disposition of property is

void or otherwise would necessarily depend on the facts and

circumstances of an individual case.

14. In the present case, considering the totality of the facts

and circumstances, I do not think that it would be unreasonable to

come to the finding that the sale transaction in question is a

bonafide one. I say this because neither the Applicant nor its

Ganesh Lokhande 14/17 9-IA(L)-12084-21.doc

Shareholders or its Directors are in any manner connected with

the company in Liquidation (VEL). Further, it is not even the case

of the Liquidator that the said property is sold at an under value

or at a throw away price which would prejudice the interest of the

creditors of the Company in Liquidation. One must also not lose

sight of the fact that this was a property that was mortgaged with

YES BANK Ltd and YES BANK being the secured creditor and

standing outside winding up had every right to enforce its

mortgage. When one takes an overall view of the matter, I have no

hesitation in holding that the sale transaction in question between

the Applicant and VEL was a bonafide transaction.

15. I must however state that this is not enough to validate

the said transaction. As laid down by this Court in several

decisions (and referred to by Mr. Shah), the Court also has to be

satisfied that the said transaction, apart from being bonafide, is

also in the interest of the Company. In the facts of the present

case, I am in agreement with the submission made by Mr.

Ardeshir as well as Mr. Purohit that the present transaction is

certainly in the interest of VEL as the debt of VEL is reduced to the

extent of the sale consideration paid by the Applicant to YES

BANK directly. It is not as if any monies have been paid to the

Ganesh Lokhande 15/17 9-IA(L)-12084-21.doc

Company in Liquidation or that any monies have been paid to any

of the Ex-Directors of the Company in Liquidation. I therefore, also

have no hesitation in holding that the aforesaid transaction of sale

was definitely in the interest of the Company.

16. Having satisfied both these tests, namely, that the sale

transaction was a bonafide one and in the interest of the Company,

I do not seen any impediment in exercising my discretion in

favour of the Applicant to validate the aforesaid sale transaction.

In these circumstances, Interim Application Lodg No.12084 of

2021 is made absolute in terms of prayer clauses (a) and (b)

which read thus:

"(a) This Hon'ble Court be pleased to declare that the sale transaction is valid, subsisting and binding on all concerned;

(b) That this Hon'ble Court be pleased to regularise the sale transaction dated 16th January, 2018 of the property being Unit No. S-5, Second Floor, Valecha Chambers, alongwith seven open car parking space Nos. 1,2,3,28,29,30 and 31; New Link Road, Andheri (West), Mumbai - 400 053 ("subject property")."

Interim Application (L) 9825 of 2021:

17. In view of what I have held above and considering that

I have validated the sale transaction in relation to the said

property between the Applicant and VEL, the Official Liquidator is

Ganesh Lokhande 16/17 9-IA(L)-12084-21.doc

directed to remove his seal and lock on the said property and/or

part thereof, as the case may be, and handover vacant and

peaceful possession of the same to the Applicant.

18. The aforesaid exercise shall be completed by the

Official Liquidator within a period of two weeks from today. Both

the above Interim Applications are accordingly disposed of.

However, there shall be no order as to costs.

19. All parties to act on an authenticated copy of this

order digitally signed by the Personal Assistant/Private

Secretary/Associate of this Court.

                                            (B. P. COLABAWALLA, J.)




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